My research interests are at the intersection of financial accounting, taxation, macro-accounting, and ESG (Environmental, Social, and Governance).
Publications
ESG Rating Competition and Rating Quality (with Svenja Dube and Cai Chen).
Forthcoming at Journal of Accounting Research
Abstract:
This paper examines how increased competition among ESG rating agencies relates to ESG rating quality. We exploit the entry of Sustainalytics as a new ESG rating agency in 2010. We conduct a difference-indifferences analysis and provide three main findings. First, we find that higher competition decreases incumbents' ESG rating disagreements of the same scope. The negative relation between competition and ESG rating disagreement persists for same-scope rating metrics not covered by Sustainalytics, suggesting that neither learning nor herding drive the results. The relationship between competition and rating disagreement strengthens for firms with more ESG disclosures, which generally require more effort to analyze. Second, we find that incumbents' ratings of ESG concerns are more strongly associated with future negative ESG news for firms additionally covered by Sustainalytics. This finding is consistent with competition improving ratings' ability to predict future negative ESG incidents. Third, we find that incumbents evaluate more difficult-to measure outcome metrics for firms covered by Sustainalytics, consistent with competition inducing more effort. Overall, our findings suggest that competition serves as an implicit disciplining mechanism of ESG rating agencies' quality.
Working Papers
The Effect of ESG Rating Agency Coverage on Disclosure of Green Innovation.
Under review at The Accounting Review
Abstract:
We examine whether ESG rating agency coverage influences firms’ decisions to disclose green innovations through patents. Firms covered by ESG rating agencies face a trade-off, as coverage raises both the proprietary costs and reputational benefits of green patenting. Using ASSET4's 2017 expansion to Russell 2000 firms as an exogenous shock, we find newly rated firms increase green patent filings, suggesting reputational benefits dominate. This finding does not extend to non-green patents. Green patent filings increase more for firms with greater potential reputational upside and a larger backlog of green technologies. Green patenting is associated with higher environmental innovation scores, which potentially enhance firms’ credibility with stakeholders. Consistent with this possibility, firms increasing green patent filings after ESG coverage attract more institutional ownership, particularly from BlackRock. Our findings suggest ESG rating coverage incentivizes firms to disclose green activities, revealing a previously unrecognized mechanism for expanding public knowledge and accelerating green innovation.
Aggregate Deferred Tax Asset Valuation Allowance and GDP Growth (Job Market Paper).
Preparing for submission
Abstract:
This paper examines whether deferred tax asset valuation allowance growth, as a measure of expected future performance, aggregated at the macroeconomy level, conveys information about future GDP growth. Using hand-collected tax footnote data, I find that quarterly aggregate valuation allowance growth is negatively associated with future GDP growth up to four quarters ahead. This relationship is incremental to existing accounting and macroeconomic GDP growth indicators, especially for forecast horizons longer than one quarter when other indicators are uninformative. Additionally, the findings suggest that aggregate valuation allowance growth provides unique information that cannot be obtained from other sources of management information, such as management forecasts, allowance for doubtful accounts, banks’ loan loss provision, and goodwill impairment. The findings further indicate that the documented association is driven by the corporate profit growth component of GDP growth. Collectively, the evidence indicates that aggregate valuation allowance growth provides incremental forward-looking information about GDP growth.
U.S. Import Tariffs and Domestic Corporate Performance (with Yaniv Konchitchki and Leslie Robinson).
Preparing for submission
Abstract:
This paper examines how imposing import tariffs by the U.S. government affects the accounting performance, investment activities, and valuation of U.S. firms. It shows that, subsequent to the U.S. imposing tariffs, U.S. firms experience improved profitability, capital expenditure, total investment, and valuation. Although imposing tariffs leads to both higher revenue and cost, the increased revenue outweighs the increased cost stemming from the imposed tariffs, resulting in a net positive effect on profitability. Additional analyses show that U.S. firms in highly competitive markets, low-growth firms, less innovative firms, financially distressed firms, and small firms benefit more from the imposed tariffs. Collectively, this paper shows that U.S. firms benefit from import tariffs imposed by the U.S. government.
Work in Progress
Aggregate Stock Returns and Short Interest over time (with Charles Wasley and Jason Xiao).
ESG Ratings and Corporate Credit Ratings.
Taxes and ESG Ratings.
Non-Refereed Publications
Vaknin-Froymovich, S., 2016. Tax Incentive for Social Investment. Jerusalem Institute for Israel Studies. Milken Innovation Center.